Category: Countries & Regions

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Baltic Dry Index reflects falling demand from China

The Baltic Dry Index has fallen by more than 60 percent in the last 3 months, headed for a test of its 2008 low at 600. The index reflects bulk international shipping rates and is dominated by Capesize iron ore and coal shipments to China. Its fall coincides with a 23 percent drop in iron ore spot prices over the last quarter of 2011. Falling demand for raw materials from China warns that economic activity is slowing rapidly and there may not be a soft landing.

Baltic Dry Index

Australia and other resource-rich economies will need to brace themselves for a sharp fall in exports over the year ahead.

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Business Sector Is More Open for Business – Real Time Economics – WSJ

The business investment momentum is continuing into 2012. New orders for nondefense capital goods excluding aircraft–a proxy for future business spending–increased 2.9% in December, reversing the two previous monthly drops. The backlog of unfilled orders is also on the rise. Fulfilling that pent-up demand means more industrial production in 2012.

via Business Sector Is More Open for Business – Real Time Economics – WSJ.

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The winners and losers of QE3 – macrobusiness.com.au

The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

That’s a clear declaration of intended QE3 if conditions are met. The two conditions are price stability and inadequate employment growth. Price stability now has a number with the Fed also announcing a new inflation target of 2%. Anything under that number potentially triggers QE3.

via The winners and losers of QE3 – macrobusiness.com.au | macrobusiness.com.au.

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What’s Going on With Debt in U.S.? – Real Time Economics – WSJ

The chart shows clearly the build up of debt heading into the bust, and the subsequent deleveraging. Overall public and private debt, by this measure, peaked at 302% of GDP in the first quarter of 2009. Since then, it has fallen to 279% as the economy has grown and some private players have lightened their debt loads.

US Debt by Sector as Percentage of GDP

via What’s Going on With Debt in U.S.? – Real Time Economics – WSJ.

Comment: ~ The Financial sector can be ignored as this merely acts as a conduit for, and mirrors, the other sectors. My concern is that Government debt is growing at a faster rate than the fall in Household and Nonfinancial Corporations debt. That is unsustainable and is likely to reverse after the November elections. At which point the economy will contract.

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King Says BOE Ready to Act – WSJ.com

[BOE Governor Mervyn King] kept the door open for more stimulus in his speech Tuesday. “With inflation falling back and wage growth subdued, there is scope for interest rates to remain low and, if necessary, for further asset purchases, to prevent inflation falling below the 2% target,” he said. The annual rate of inflation in the U.K. dipped to 4.2% in December from 4.8% a month earlier, and is expected to slow sharply this year.

via King Says BOE Ready to Act – WSJ.com.

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Dow Jones Europe

Even Europe is showing signs of life, with Dow Jones Europe Index breaking medium-term resistance at 240 to signal a test of 260. Breach of the descending trendline would suggest a bottom is forming. Recovery of 63-day Twiggs Momentum above zero would strengthen the signal. In the long-term, breakout above 260 would complete a double-bottom reversal with a target of 310*.

Dow Jones Europe Index

* Target calculation: 260 + ( 260 – 210 ) = 310

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Australia, Japan and South Korea

Australia’s ASX 200 index is lagging other resources markets, but penetration of the descending trendline on Monday suggests that a bottom is forming. Breakout above 4400 would signal a primary up-trend, with an initial target of 4800*.

ASX 200 Index

* Target calculation: 4400 + ( 4400 – 4000 ) = 4800

Japan’s Nikkei 225 is headed for a test of 9100, but still has some way to go. Cross-over of 63-day Twiggs Momentum above zero would be a bullish sign.

Nikkei 225 Index


Dow Jones South Korea Index is testing resistance at 420. Respect of the zero line by 13-week Twiggs Money Flow indicates buying pressure. Breakout above 420 would complete a higher trough, signaling a primary up-trend. Target for the initial advance would be 460*.

DJ South Korea Index

* Target calculation: 420 + ( 420 – 380 ) = 460

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Canada, Brazil and South Africa

Resources markets are recovering, with Canada’s TSX 60 index testing resistance at 715 after breaching the descending trendline. Breakout would complete a higher trough, signaling a primary up-trend. Target for the initial advance would be 800*. Rising 13-week Twiggs Money Flow indicates buying pressure.

TSX 60 Index

* Target calculation: 720 + ( 720 – 640 ) = 800

Brazil’s Bovespa broke through 60000, signaling a primary up-trend with an initial target of 65000*.

Bovespa Index

* Target calculation: 60 + ( 60 – 55 ) = 65

South Africa’s JSE Overall Index broke clear of 33000, signaling a primary up-trend. Bullish divergence on 13-week Twiggs Money Flow strengthens the signal. Initial target for the advance is 35000*, with a long-term mark of 37000.

JSE Overall Index

* Target calculation: 33 + ( 33 – 31 ) = 35

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S&P breakout confirmed

The S&P 500 breakout above 1300 suggests a primary advance to 1450*. Rising 13-week Twiggs Money Flow indicates buying pressure.

S&P 500 Index

* Target calculation: 1300 + ( 1300 – 1150 ) = 1450

The signal was confirmed by similar breakouts on Dow Industrials and the Nasdaq 100, the latter offering a target of 2750*.

Nasdaq 100 Index

* Target calculation: 2400 + ( 2400 – 2050 ) = 2750

Dow Transportation Index has also completed a higher trough, signaling a primary up-trend. 63-day Twiggs Momentum recovery above zero strengthens the signal.

Dow Transportation Index

* Target calculation: 5050 + ( 5050 – 4550 ) = 5550

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